When your goal is to earn steady cash flow from your investments, you need assets that actually pay you. That typically means owning things backed by real, income-producing activity – companies paying dividends, properties collecting rent, or bonds issuing interest payments.
On the flip side, assets like cryptocurrency or precious metals may rise in value over time, but they don’t produce income. They’re purely speculative plays that rely on price appreciation. There’s nothing wrong with holding them for growth or diversification, but if your goal is consistent monthly income, they won’t deliver cash flow.
With that in mind, any income-focused exchange-traded fund (ETF) portfolio should prioritize cash-generating assets – funds that own companies or securities making regular payments. Here are two ETFs I like that pay investors monthly and could form the foundation of a $20,000 income portfolio.
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$10,000 in Canadian REITs
For real estate exposure, the BMO Equal Weight REITs Index ETF (TSX:ZRE) is a straightforward choice.
Equal weighting matters in a narrow sector like real estate because it prevents the largest property trusts from dominating the portfolio and allows smaller, faster-growing names to have the same influence.
The ETF holds about 20 real estate investment trusts across retail REITs (39.2%), multi-family residential REITs (27.9%), industrial REITs (9.8%), diversified REITs (8.6%), health care facilities (5.3%), health care REITs (4.8%), and office REITs (4.4%).
This ETF’s annualized dividend yield is 4.8%, based on its most recent monthly payout multiplied by 12 and divided by the current share price. That income is attractive for investors seeking dependable monthly distributions.
The management expense ratio (MER) is 0.61%, meaning you’ll pay $61 annually for every $10,000 invested – reasonable for an equal-weight, actively rebalanced fund.
Because REIT distributions are taxed as ordinary income rather than eligible dividends, ZRE is best held inside a Tax-Free Savings Account (TFSA) to shield those monthly payments from tax.
$10,000 in Canadian banks
For financial exposure, the BMO Equal Weight Banks Index ETF (TSX:ZEB) is the natural complement.
In this ETF, each of the six major Canadian banks receives an equal weighting every quarter, which helps maintain balance and creates a mechanical buy-low, sell-high effect when markets fluctuate.
Canadian banks are known for their reliable, above-average dividends. While recent share price gains have trimmed yields somewhat, the ETF still offers a 3.3% distribution yield and charges a modest 0.28% MER, about half the cost of ZRE.
Unlike REITs, ZEB distributions consist mostly of eligible dividends, with a small portion from capital gains and return of capital. That makes it more tax-efficient for investors who have already maxed out their TFSA and are holding the ETF in a non-registered account.
